The Mighty Linden Dollar

Thanks to Prokofy Neva, I read the interesting analysis on RightAsRain Rimbaud‘s blog (and the comments in it) about the state of the land crisis in the Second Life® world, and how strangely Linden Lab® reported a massive increase in land sales and income from land. RAR actually shows that the growth comes pretty close to a new island per new active user!

One thing that always worries me in SL is how few people are willing to spend money in SL, overall. They “expect” free things, and they expect other to work a lot to provide them with free things. It doesn’t matter if it’s land, objects, or services (ie. free music). They don’t want to pay, period.

Yesterday a PhD student asked me if I had by any chance a texture with an asterisk on it. I had none but I told him how it would be so very easy to create one. After my blabbering he explained that he obviously knew how to do a 128×128 texture with a big asterisk on it, but he had no money to upload it.

I was flabbergasted. This is a PhD student who probably earns more than I do, and certainly has less expenses. And we were discussing L$10 — a few cents (either in Euros or US$…). With some shame, he then confessed that he had no intention of getting a credit card just for SL, it was a hassle… and when I explained to him that there were quite a lot of alternatives (from international bank transfers to LL to local agents who accept domestic bank transfers) he was unaware of all that. Or perhaps… uninterested. It’s always safer to beg for someone else to upload a L$10 texture. As a matter of principle I did not send him the money over, and he wasn’t asking for it really, since begging for a few cents seemed ludicrous even to him.

In my country there is a culture of never paying for things, so perhaps this particular guy is just copying the attitude that he sees around him. None of the avatars he deals with have money, or ever bought anything in SL. They just get along with freebies and enjoy creating content. Applying their skills to create content in order to sell it never crossed their minds; they just happily make do with what they can beg their friends for free. They never have their own land — neither owned on the mainland (it’s hard to see anyone who is Premium these days!…) nor rented from anyone else. They squat. They get invited to cool groups by being nice, and expect that someone in the group provides them a corner for a sandbox or skybox.

For them, the SL economy is something that happens to other people, which they view probably as “rich bastards”, but they don’t miss the “luxury” of being able to own land and buy content

On the other hand, they buy all possible gadgets in RL, subscribe to paid TV channels on cable, avidly buy games for their consoles, and naturally spend money on other trivial things. And they do it as a matter of course, even knowing that in RL there are also free alternatives to all that.

Now this lack of willingness to spend money in SL is worrying, since it is sadly something I see happening all over the place. There is just a very, very small number of residents — 1 to 2% perhaps — that are active participants in the economy; Linden Lab allegedly claim that about a hundred thousand residents regularly spend money in SL, and close to sixty thousand make more money than they spend. I’m not saying that everybody ought to be “forced” to spend a few US$ every month, like a “requirement by law” to participate in the economy. Of course not. However, the total lack of interest or motivation to acquire content by most residents is frightening.

Another example, someone who wanted to do a thesis presentation of their mastership work on SL asked me what they needed to do. I explained that usually slideshow presenters are used — you just save your slideshow presentation to the appropriate format, and upload it. His virtual shoulders sagged. His answer was: “I will never make enough money for that on the camping chairs, my presentation is in a few hours”. Again, my shock and surprise. We were talking about the price of a cup of coffee in RL! And this guy — another student — was complaining about the “time it takes to make (free) money in SL” just to upload a few textures… for his real work in SL… when just one Euro or two would be enough.

I shared these comments with others, and they looked at me in a strange way. And then carefully explained to me that nobody (in my country at least) is willing to put any money in the SL economy. The whole land used by the Portuguese is 90% sponsored by companies and non-profits in SL; landowners are such a tiny minority. I’ve heard that the Brazilians are not much different. Sure, they all have great fun in SL, but they don’t wish to spend a single cent in it.

We used that avarice to work for us in a campaign, by giving out L$10 to anyone who gave away a texture announcing an event iRL for a client. L$10! In less than eight hours, half the active Portuguese population in SL had been targeted. The implications were awesome. Everyone thought, “wow, I can get 10 friends to accept this texture and will make more money in half an hour than by sitting two or three days on camping chairs!”

It’s not that these people are poor. Prokofy very well pointed that out, ages ago: anyone with enough money to buy a decent computer to run SL and have broadband can spend a few Euros or dollars per month to invest in the economy. Even if they live in Angola or Mozambique or Ethiopia or Laos and Vietnam. There are SL users there as well. No, they don’t put any money in it because they don’t want to. And this is what ties everything together: if a huge number of users don’t want to invest a few dollars in SL, they won’t even dream of renting or buying land, and that means that while the resident population might grow, the number of people willing to spend any money in SL doesn’t — and land will remain empty without potential buyers.

Naturally, that’s a cultural thing, and will be different from market to market. And there are always a few people wanting to dynamically engage into the economy; as they quickly found out, however, getting people’s willingness to spend money is way harder than they thought. And it’s not even the question between “cheap” or “expensive”. I’m quite willing to pay L$1000 for an unique outfit with high quality texturing. But others are not even willing to pay L$100 for a poor quality one. Or L$10 for one with awful quality. Even if they have the choice between L$1 (with better quality) or zero, they’ll always go for freebies! I have extensively seen that happening on SLEX, where I have ultra-low quality “newbie clothes” for sale at L$1, and slightly better ones for L$10. I don’t make a single sale on the L$10 ones — and I haven’t for years. The old L$1 ones sell like hot pancakes every day, even if they’re ugly.

Now, I’m not sure what this means long-term. My reaction to Lively was that I was willing to immediately buy some good content, if it were available; but one local journalist claimed that one of the best things about Google — praising their “vision”! — was that it’s all for free, and “Google is doing the right thing” not to encourage an economy. While on the other side we have Meez — the freebies are nice, but for a few dollars, you can get access to gorgeous content. Same as in IMVU. I hardly spend time in either, but on the first day I’ve logged on each, the first reaction I had was to buy some virtual currency to get some money to get better content, and I did that without second thoughts. It was my “natural” reaction — sure, there are good “freebie” options, but why be limited by them? Good content takes time to create and it’s worth paying for it. That was in fact the whole reason why I went Premium on my 5th day in Second Life. And the reasons for doing so, back then, were definitely not so strong: there was definitely a lot of good content around, but there are a million more items these days, and thousands of events to attend, and… 18,000 islands to look for a nice space to live in.

However, it seems that I’m part of that odd minority that actually believes that one of the strengths of Second Life — which makes it different and unique — is the content-based and the land-based economy. It’s the major reason I’m not more active on OpenSim — for ideological reasons (clearly stated so!), OpenSim does not support money or content ownership. It’s not a technical issue, it’s a political one. And until that silly reason is reverted, I’m not eager to join the hordes of people gleefully creating things on OpenSim and seeing it being copied all over the place. There is nothing wrong with freebies. There is also much less wrong in getting paid for doing great content. Second Life’s grid allows both models to co-exist.

So I think that there is more behind the “land crisis”. It’s not just land barons being unable to push more land out. It’s not only having shorter margins (or even dumping land to get rid of the high tier). It’s a motivational crisis, and I’m not sure if it’s only Linden Lab to blame (for the high rate they dump land which remains unsold — remember, their business model comes not only from tier, but also, and very significantly so, from selling new islands every month; I already commented on the dangers of that, a long time ago). It’s not the quality of the content that is declining — private, resident-created initiatives like Loco Pocos show that the complete reverse is true: content just gets better and better. And there are still a hundred thousand or so people willing to pay for content. The problem is that it’s always the same hundred thousand people — the very same ones that came to SL in late 2005 or so and are still around, and are still dynamically engaged in the overall economy.

The newer generation is the freebie generation. And this has to be reverted. Second Life, without an economy, weakens dramatically its value as a cornerstone of the (future) Metaverse. The economy of land ownership and content sales is what made Second Life become a major player (undeniably so) in the market. IMVU, according to Hamlet, seemed to understand it perfectly as well (although they don’t have land sales) and allegedly has more registrations than SL, but the same amount of active users.

I leave this question open. RightAsRain Rimbaud’s business model plays on the assumption that people (some people!) are willing to spend money on high-quality content. That’s certainly quite true for at least a hundred thousand residents. The rest of them, however, don’t see the point of having an economy at all — and no, Prokofy, they’re not all communists 🙂 They’re just, well, uninterested to spend money in virtual worlds, no matter how appealing the products and services available to them.

And I have no clue on how to revert that worrying trend. Definitely there is no single answer to it, and it’s not just blaming Linden Lab’s policy of dumping land and crashing the land market, although that certainly helps to destroy the economy as well, bit by bit.